Although the Reserve Bank of New Zealand (RBNZ) continued aggressive interest rate hikes at its August policy meeting, it still failed to support the strengthening of the New Zealand dollar.
Focusing on the results of the meeting in the Asian session this morning, the RBNZ maintained an aggressive interest rate hike for the fourth time in a row by 50 basis points, leaving the current interest rate at 3.00%, a 7-year high.
The increase is expected to cause a decrease in the inflation rate in the near term due to the fall in fuel prices and the stabilization of shipping costs and the RBNZ also informed that the inflation level will only return to the central bank's target by mid-2024.
Apart from that, demand in the economy has managed to hold up through the first half of 2022, constrained by affected global supply, labor shortages and high levels of sickness due to COVID-19 and other diseases.
Governor Adrian Orr's follow-up statement, the RBNZ does not expect any recession but sees economic growth coming in below expectations.
While for the US dollar currency, it is seen to be moving a little slower compared to the strengthening exhibited at the beginning of the week with the possibility of investors taking cautious steps ahead of the publication of United States (US) retail sales data as well as the minutes of the FOMC meeting which will be the focus.
Measuring the price movement on the chart of the NZD/USD currency pair, the price at the opening of the trading session earlier in the week has slipped around 100 pips to reach the 0.63500 zone after ending last week's bullish price pattern.
The decline continued in yesterday's trading on Tuesday past the 0.63500 zone with the latest lows hitting around 0.63150 before prices rose slightly towards the end of the New York session to close trading below the 0.63500 zone.
Continuing in the Asian trading session this morning, the price hovering below the 0.63500 zone has then jumped around 50 pips following the RBNZ policy meeting results for the initial reaction to the continued rate hike by the central bank.
However, the gains did not last long as the price started to show a decline again after reaching the 0.63800 level and testing the daily low on Tuesday yesterday with expectations to continue the decline in the following session.
The initial rise in price was also seen to fail to cross the Moving Average 50 (MA50) barrier on the 1-hour time frame on the NZD/USD chart before retreating again, signaling for prices to resume bearish trend movements.
If the price continues to fall to a lower level, the price is expected to shrink up to the 0.62000 level after passing several concentration zones such as at 0.62400 and recording the latest 3-week low.
For lower targets if the bearish trend continues, investors will likely focus on the 0.61000 price zone.
However, watch out if the price bounces back and crosses the 0.63500 zone and the MA50 barrier before signaling a bullish trend change again.
The price will rise to test the resistance zones that were the focus of last week such as at 0.62400 before heading towards around 0.64600.
Passing the following zones will record the latest 11-week high level with the next focus expected to be at the 0.65500 level which was tested in last June's trading.
